If Bad Credit Risks Are the Ones Who Most Actively

question 66

Multiple Choice

If bad credit risks are the ones who most actively seek loans then financial intermediaries face the problem of

• A)moral hazard.
• B)adverse selection.
• C)free-riding.
• D)costly state verification.

---

Definitions:

Material Breach

a significant violation of a contractual agreement that permits the other party to the contract to demand remediation or terminate the agreement.

RMBCA

The Revised Model Business Corporation Act, which guides the incorporation and operation of corporations in many U.S. states.

Disinterested Directors

Board members who do not have a personal or financial interest in a corporate decision, ensuring unbiased governance.

Conflict of Interest

A situation where a person's private interests might influence or appear to influence their professional judgment or actions, potentially leading to ethical issues.